Lina Khan points to Figma IPO as vindication of M&A scrutiny
techcrunch.com
techcrunch.com
The idea that there's a significant lobby on fucking Hacker News unhappy that a startup IPO'd for a zillion bucks and made everyone rich is twilight zone shit. It makes no sense according to the stated values in the fucking masthead.
[0] https://techcrunch.com/2024/06/15/ftc-chair-lina-khan-on-sta...
We have a problem where regulators are bad at their jobs most of the time, and then people develop the heuristic that all regulation is bad.
You need some rules to price major externalities. Not minor externalities, because regulatory overhead and enforcement are themselves externalities and it doesn't do any good to burn $1 in overhead to prevent $0.90 in some other cost. But you want a ban on leaded gasoline.
And you need antitrust rules, because "the market is more efficient" is fundamentally predicated on competitive markets. Real competition is the sine qua non of that actually working. Most government inefficiency is because the government is a monopoly, and private monopolies are just as bad.
The problem is politics breaks everyone's brains. One party says "regulation good" and the other side says "regulation bad" before either of them considers what the regulation actually does. And then you have one party promoting illiterate nonsense like price controls or justifying busybodies who want to micromanage things they don't even understand or trusting the government with mass surveillance data just because they're not a private company, and on the other side you have people with no objections to tying arrangements or companies with double-digit market share buying even more of their competitors.
"Everything should be made as simple as possible but no simpler." That last bit turns out to be kind of important.
No, we have a problem where 95% of regulations work so well that no one even remembers that they exist (child labor, etc). A media environment that reports on outliers for clicks and corporations that want to dump industrial waste in rivers.
Private cartels are just bad governments with even less accountability or incentive to be efficient. Take the worst DMV office in the world and put it in charge of something way more important than license plates.
These are people who are ideologically opposed to any regulatory intervention? How can such an extreme position even begin to make sense? This is like letting boxers (or MMA fighters) fight in the ring without a referee, isn't it? As it is, there are lax rules that are getting even more relaxed by the day and even those lax rules aren't enforced consistently, for big businesses and those with money.
There are obviously the people in this cohort and there are also the people who think they will be in this cohort, who think they will be the victors in a cartel-like world.
Heck, before layoffs and the threat of AI started concentrating even more power into tech leadership there were plenty of tech folks along for the ride as the high paid, in demand workforce benefiting from the above.
If this was a viable strategy then they would have just done it regardless, right?
Meanwhile the solution to that is to break up the monopolies to begin with. You don't have trillion dollar companies monopolizing the labor pool if you don't have trillion dollar companies.
I thought they were dumping everyone at the moment. Unless you’re an AI researcher.
This mafia capitalism isn't even good for the capitalists! They just can't get it together on a sustainable system!
This is clearly a valuable game! It is worth in expectation $20B. But it also has a 50% chance of being worthless to you.
Someone offers to buy it from you for $20B. You agree, giving up some upside for some downside protection.
But then someone else says that's not allowed. So you play the game and you roll a six and get $60B.
Does that prove the person who made you play it rather than sell it was "right," ex ante?
The vast majority of startups will never IPO. Acquisition is the only viable exit. That’s because the bar for IPO has risen so high that only massive already incumbent unicorns can reach it. IPO isn’t a way to raise capital to compete. It’s a victory lap if you’ve won already.
Don’t know if this is actually true, that she was having this chilling effect. I am relaying a sentiment I’ve encountered.
Of course the other reason is tech-right echo chamber brain rot. People need to get off Xhitter. (Not a fan of doomer left anti tech brain rot either. There’s more than one kind of brain rot around.)
Or you could run the business profitably and not exit at all.
It seems to me that the same weaponization of binary tribal thinking in red/blue social stuff has a corollary in "entrepeneur / commie" oversimplification with about as much nuance.
Smart people get emotionally manipulated on every other kind of politics at the behest of the new oligarchs, why not this one?
I heard a Thiel interview recently where he ranted about Greta Thunberg and the antichrist and used a bunch of very online Xhitter bubble terms like referring to low efficacy as “low-T” and I was like this guy needs to touch grass. It didn’t even make a lot of sense.
It's that she was incredibly ineffective.
Of course she was right. That's what made her practical ineffectiveness so problematic.
She was often 100% right on what should be done but could only achieve 0-10% of it.
I'd rather have someone who is 70% right on what should be done, but can achieve almost all of it, as some previous FTC chairs were.
The argument that she had the correct agenda, won a few, lost most to a captured judiciary (correct me if I'm mis-characterizing your position) is probably the stupidest thing I've seen on one of the dumbest threads in recent memory.
Can you clarify where I've lost the plot with your argument and restore some of my sorely tested faith in humanity?
Blocking the merger was good. But I'm not convinced the IPO was good. I think trying to be a company that's worth tens of billions of dollars is only going to make Figma worse. I care about the users more than the people that got rich.
Small float, big hype, litterally designed to pump the stock on the float.
1.2bn was raised - of which only 0.8bn was cashing out existing shareholders - all the other investors got the pump as planned all for the low price of $1.6bn.
Basically the existing shareholders got watered down by ~5% and the value of the shares they still hold are 3x and now liquid, better than they got in any of the vc funding rounds.
Chairwoman Born was right about everything (natch) and we got a modest crisis to prove that almost immediately afterwards with the Russian sovereign debt default and a society-changing crisis in 2008 (same OTC derivatives contracts right down to the flawed VAR methodology).
If we had let Ms. Born do her job as she was so clearly and eminemtly equipped and prepared to do it, you get an alternate history. We're probably sitting here on twenty years of budget surplus, carbon goals getting lined up and knocked down like clockwork, a well-run Internet living up to its potential, and two generations coming of age in Boomer-style optimism and prosperity instead of cynical hopelessness. There's probably no fentanyl crisis to speak of and Putin gets a nervous palsy just thinking about displeasung NATO.
God knows what the price will be this time.
None of the FTC's business
> If you care about employee comp? She was right.
None of the FTC's business
> Number of listings, new potential acquirers for your startup, more diverse office geography, right right right right.
None of the FTC's business x3
> If you care about consumer choice, she was right.
Ok, so this is the FTC's business. But does Figma compete with Adobe in any major areas? I'm not aware of any major Adobe products like that.
> None of the FTC's business x3
> > If you care about consumer choice, she was right.
> Ok, so this is the FTC's business.
You don't think there's relationship between consumer choice and a large number of acquirers? These are basically equivalent statements, they're both saying "markets remain competitive".
I think it might be an alt for Peter Thiel himself! We're in the presence of greatness friend, we should just lean back and be enlightened.
And, no, they aren't remotely equivalent statements to each other or to "markets remain competitive." If there are 100 products in a market, and an acquisition reduces that to 99, it will have no effect on the competitiveness of a market, which is why such an acquisition is not typically any of the FTC's business.
Someone made a good analogy on twitter that Khan essentially cut off a genius pianist's right hand, the pianist persevered and somehow succeeded in retaining their talent in spite of having one hand, and now Khan is taking credit for the feat. In the same way, the fact that Figma still exists is not proof that she was right.
So as usual here we are with the epic showdown of Data and Vibes...and in an obvious landslide Vibes takes it home.
Does it really matter if Figma was bought vs IPO? No of course not. Khan just needs a poster child for her overall intervention philosophy.
Pointing at Figma as a success for her overall world view is like the religious who say “oh god saved me from that flood” while ignoring the hundreds who did die. The Almighty wanted them to die? Or…?
If you’re gonna claim the successes you have to claim the failures
I think it matters. Look what happened when Adobe acquired Macromedia in 2005. The innovative product (Fireworks) that brought many (but not all) many of the innovations that would later come in Sketch and then Figma was left to slowly die because it competed with their flagship product (Photoshop). That delayed innovation in that market segment by around a decade.
Let’s not forget our beloved Flash, who knows how Macromedia would have handled it and maybe it wouldn’t have had to be removed from browsers under Adobe’s watch due to security issues.
I almost never see anyone mention Macromedia in relation to Flash these days, almost as if history has rewritten it to an Adobe thing.
Someone caught a shooting star in the palm of their hand one time and this happened.
What are you talking about?
If the government is net ahead after a decade or so, then we'd know.
This approach to antitrust wouldn't work in cases like the Apple case, where the power is worth it to the company only because they can misuse it, but it would be a very fair and accounting-transparent remedy for the "startup gets bought by competitor" case.
There is no need to bikeshed a new solution here. Antitrust law solves this just fine, as exemplified by this case.
We've got a lot of history on what happens when technology is acknowledged as a natural monopoly and guided through it's development, evolution, and dissemination through society for the global welfare: that's the entire 20th century friend: the transistor, the Internet, the laser, fucking Velcro.
We're living through a time when that treasure trove of public wealth (paid for by taxpayers) is getting captured up by a caricature of gilded age kleptocracy at the front row of the fucking Inaugeration.
We know what the outcomes are. I don't know why people who hang out on Hacker News are fighting the data on this tooth and nail. Maybe it's because Trump threw her out, maybe it's because they own a bunch of NVIDIA stock and like the status quo, I don't know.
The outcomes are not in fucking dispute in this case or the macro situation.
Adobe killed their Figma competitor (XD), so the reality of the UI design tools niche in the design tools market is that Figma actually has a near monopoly. Sketch still chugs along, but its market share is negligible. Penpot is a neat idealistic community effort that is lightyears behind.
This is one of the reasons why Figma continues to tighten the screws on their userbase, who doesn't like it one bit, but continues to pay.
Now, this is all not to say, that it would've been any better with Adobe's involvement, more like lamenting the fact that Figma lived long enough to become a villain.
Monopolies aren't illegal. Preventing competition is the thing we want to stop. As far as I can see, Figma doesn't do anything to give themselves an unfair advantage or prevent other players from entering the market.
Fairness doesn’t mean everyone gets funded regardless of their quality.
This is not obvious at all to me. Instagram (bought for $1B) is probably worth ~700 B of Meta's market cap.
Cartels form and collude, the JP Morgans or Goulds of the world see excessive competition next to their neat steel or railroad trusts and decide to organize it. And sometimes this can even be an improvement (those old telephone poles with like 90 separate junctions just got too tall to be safe!)
But on average, the public would like (or should want) a say in how markets are organized, because it is both possible and lucrative to induce market failure. Big Tech is especially good at this (its arguably far more their speciality than technology is).
Markets are inevitable (try to stop them forming if you don't believe me), but market failures are generally not inevitable, they are generally the result of poorly refereed markets.
If we destroy an entity that has power, the power goes someplace else and in the case of (democratic) government entities, it rarely ends up someplace better for us regular folks.
The question is whether those things are going to be determined at a polling place by voters or in a smoke-filled room by gangsters.
Well, yes. But that does seem to gloss over the important part which is how they do it - hiring lobbyists and influencing the official regulators. If the frame is that someone is going to be the most powerful force in the market then sure, but the government setting it to be a particular body by fiat just creates a ripe target for corruption.
The history of the tech industry has been one of where if left to their own devices coders would create a thriving and tolerant software ecosystem and the main thing stopping them has been IP law. And a secondary thing stopping them has been government pressure (there has been a bit of a spasm recently because of the aftereffects of, effectively, systems set up to support things like Operation Choke Point, for example).
Assuming some semblance of the rule of law, Google & friends ultimately can't stop someone competing with them unless the government is active in the space the space too. More formal regulation is probably just going to cement their position further.
Year after year, big business lobbies, bribes, cajoles, blackmails, whatever it takes to get rid of attack dog regulators like Lina Khan.
I'm sorry friend, history does not say what you think it does. History says that good outcomes come from either brutally regulated monopolies (ATT / Western / the Labs), public/private partnerships (DoD funding the Internet, basically every major innovation we coast on today), and busting the fucking chops of mega-trusts (JP Morgan, Gould, steel, railroads, telegraph, it goes on and on).
Why does big business hate aggressive regulation if it's "actually good for them"?
They like a Goldilocks regulation, a little friction to new entrants, a lot of discretion in the hands of pliant former industry people.
They hate Lina Khan.
Only regulators have absolute power in this regard. I'd prefer decentralized power
It's concerning that you don't see this, but makes no difference to how the world works.
The consortium creates an oligopoly which prevents mutually beneficial deals that would have otherwise taken place in a regulated competitive free market between consumers and producers.
Maybe it's not a great choice of words to say here "the large company regulates the space" but it's definitely a problem worth pointing out.
But they're dictators. There's no democracy, there's no voting, and Apple does whatever it feels is best for them. Just like a dictator would run their country.
There's plenty of mutually beneficial arrangements that Apple unilaterally struck down because they want to maintain their stranglehold on the market.
So, "no regulator" doesn't mean freedom from regulation; it means the emergence of undemocratic, unchecked power by whoever can grab and wield it.
At some point, "Big Tech" is really "Big Finance" in disguise.
Khan forced the employees and investors to continue working and gambling on a company they might not have wanted to continue working for or gambling on. It doesn't really matter that the gamble succeeded in this case.
First this is all hindsight now. We don't know the probabilities of this outcome vs. others. Figma's shareholders didn't at the time, which is why they chose to sell. Khan didn't either.
Second, 3x over two years isn't that much. There must be many opportunities in SV for all of Figma's employees and investors that could have given them a much higher return than that with much less risk.
I don't have this data, but one could look at secondary sales in the past two years as a measure of the increased risk and opportunity cost, right?
Any delay of people getting liquid impacts the creation of other startups, both by the Figma people who can now leave and do their own thing and for the companies Figma stakeholders would have invested in . This is super hard to measure but it is the kind of thing markets are good at measuring when they ask shareholders "sell now to Adobe or wait to IPO?"
This seems really good for Figma users, most of all. Most of the value destroyed by the acquisition would have been in the distortion and likely ultimate destruction of a company culture that made an insanely good product.
But those people are capable of going and making new products, and maybe Figma at its current phase is now too boring a thing for their talents, and should be managed by a more boring organization staffed by people who are slightly less able to make another Figma.
Who knows, but I doubt Khan (or any one individual or organization) is in a better position to assess the optimal delivery of what people want than the incentivized distributed intelligence of all the stakeholders and the people and markets around them.
Again, there are other reasons to do this that markets wouldn't quantify.
"The Bottom Line
A 73% annualized return would:
Easily rank in the top 10-20 best-documented investment returns of all time if sustained for multiple years
Significantly outperform virtually all professional fund managers and legendary investors
Be 7x higher than the long-term stock market average
Turn $10,000 into $30,000 in just 2 years (your 3x example)
Early-stage growth of revolutionary companies (like early Apple, Amazon, or Netflix)
Cryptocurrency bull runs
Highly leveraged trades
Exceptional market timing during recovery periods
Small/micro-cap stocks experiencing explosive growth
In choosing to sell they decided the risk wasn't worth the reward.
If you were in their position, would you have sold or held?
Maybe they were seeing the AI boom on the horizon and wanted the capital out now to deploy there. They wanted to chase AI not hodl some “old” pre-AI thing. A lot of people think AI is going to render the entire process of which Figma has become a key part obsolete. (I don’t.)
Those are two things I can think of to explain this behavior.
Also some people like to get out when they’re ahead. “The world is full of rich people who sold too soon, not rich people who sold too late.” This makes sense if you are generally pessimistic, which many are for various reasons.
As a founder? Obviously I hold unless I know something is rotten in Denmark and it's about to collapse like a Michael Siebel sale to Autodesk. Are you kidding? I've got a startup so successful that I'm already a billionaire and my choices are:
- let it ride, be a star, chart my own course - go work for fucking Adobe lol
Yeah, easy one.
If I'm an early VC or a limited partner with some structural reason to need the cash before some accounting period ends or something? Maybe I want the sale. Maybe I own a bunch of Adobe stock and I want the consolidation. Maybe a lot of things.
Don't know why the deal got agreed to pending regulator approval. If I'm an already richer-than-God founder, or an employee who can either get full value for my shares or get Windsurf'd in some preference shenanigans, or most anyone else involved? Then fuck Adobe.
a lot of tech darlings have been decimated by the stock market. & Adobe can still buy them once they're public, maybe even cheaper than $20bn.
Real talk Lina
I don’t know. All I know is that Lina is out of power, and suddenly we see an upswing in M&A. Coincidence, I’m sure.
Lina Khan was entering a market that was deeply flawed thanks to decades of bad policy.
That's the talking point, but it doesn't survive even 30 seconds of thought. Yes, the biggest tech companies are very big -- debatably too big! -- but there are easily hundreds of smaller cap companies that you probably haven't heard of who are big enough to acquire startups. If anything those companies are the bulk of the M&A market, and the FTCs actions shut it all down [1].
The problem with the Khan view of the world (IMO) is that it was so fixated on the killing the whales that it didn't realize it was killing the other fish.
[1] By way of explanation: just by the nature of software economics, if you're big enough to make acquisitions in some niche industry, you probably own that industry (or are at least a duopoly player) and are therefore concerned that the FTC will target you.
I think startups exiting via M&A is part of the problem. It creates perverse incentives which is basically fuck profits, squash all competition while lighting money on fire and THEN when you are so embedded, sell the company so original investors get their money back and new owners screw over everyone knowing there tunneling out of your really thick walls is going to be extremely difficult.
In a model where company had to turn a profit and investors would slowly make their money back, it would probably be net win.
Yeah, you're gonna have to defend that assertion.
> I think startups exiting via M&A is part of the problem. It creates perverse incentives which is basically fuck profits, squash all competition while lighting money on fire and THEN when you are so embedded, screw over everyone knowing there tunneling out of your really thick walls is going to be extremely difficult.
I hate to burst your bubble, but the chances of a small startup getting acquired while "lighting money on fire" is basically zero. You have a particularly narrow-focused lens on startups that is driven by a few high profile stories. When you're on that sort of YOLO rocket ship, you're not looking for acquisition -- if it happens, something went wrong.
So yes, part of my argument is that smaller roll ups could not happen, and that market looks nothing like what you're describing.
Not everything needs to last and companies that can’t radically transform their management culture to enable innovation and competition deserve to wane until they’re in a steady-state or they go under to allow for a new competitor to rise.
Basically the random and aggressive nature of it was having a chilling effect on all M&A. Why would you go thorough the hassle of a small acquisition (as a buyer) if you knew there was a even a 10% chance that the FTC was going to take an interest?
When a huge company can easily acquire basically any small promising competitor, that is exactly what Khan (and many others of both parties) consider a problem. Chilling those sorts of deals was indeed the point.
But if the buyer was, say, the 312th largest tech company in the U.S., the chance of FTC intervention was essentially zero. If buyers in mid-size range were pointing at Khan to explain an M&A slow-down, I personally would not take them at their word.
Maybe, but it doesn't take a lot of scrutiny to scare the crap out of you if you're a major player in some niche industry with a few hundred million in ARR. Which is most public companies.
That's the perverse thing about this stuff: the biggest players are probably the least sensitive to the regulatory burden.
This "scare" characterization isn't how anybody thinks in reality. Everything is a cost benefit analysis, the risk that you'll come under FTC scrutiny is going to be a factor weighed against the potential gains of the acquisition. Companies understand their own place in the market relative to their size and dominance, the overwhelming majority of companies know they basically have nothing to fear from the FTC ever.
It is precisely the companies that have lost the internal capacity to innovate (Meta) that have the most to lose and the companies that were going extremely well already (Instagram had a bunch of suitors and could have chosen to punch out later in the process, I heard this from Krieger in person) who have the most to gain.
The losers here are people who can buy and hold FAANG as a basket and just sit back and let the market transfer all wealth to pensioners. The winners are founders, employees, new startups, consumers, cities with more offices in them, that's a partial list.
Instagram was bought for $1B. Whether they had 13 or 1300 employees, a $1B acquisition isn’t small in an anti-trust sense.
Because the shares were sold to the public and now trade at three times what the absolute ceiling on their value would have been, and because everything from early options to later stage RSU equity comp structures will now convert at the full market valuation, the preference ladder and ratchets and all the other ways you can get Windsurf'd as an early employee (sometimes even a founder!) don't kick in, so the rank-and-file equity holder is rich now too.
Future founders now have another well-heeled public suitor.
If you even remotely believe in Hacker News style "tech startups make people rich and this is good" stuff, then this is a grand-slam home run win by any measure.
Maybe time to re-evaluate what you think of Lina Khan's policy agenda in light of data on the outcomes? It's of course possible there is some other data point you have in mind where it went poorly and you keep your opinion. But if that opinion was of the bland "regulation is bad for tech startup people trying to get rich" variety, seems maybe time for a re-think?
Edit: Within, not Withings
The VMware shareholder's value though probably went up from that deal.
Yahoo, BlackBerry, Kodak, Nokia, Sears.
So it’s clearly not “once you have a monopoly it’s game over for competition”. Markets aren’t stagnant, and as they change it provides opportunities for new competitors to do that “new thing” better than the monopolies.
That's the point. Markets aren't stagnant. When changes happen, monopolies are susceptible to being unseated.
America experienced uncheck monopolies during the Gilded Age. Most thought that rapid industrialization, economic growth, and technological advances would have resulted in enough competition to create an economic utopia. Instead, even while the United States experienced a surge in wealth and prosperity, the underlying reality of political corruption, social inequality, and labor unrest created a nasty, brutish existence that was only solved when the Trust Busting Roosevelt's transformed America by breaking up the monopolies.
If you like free market capitalism you can't be in favor of monopolies, and if you dont want monopolies you need STRONG enforcement of antitrust M&A regulation. We are well past a correction since Regan stopped antitrust enforcement. I would argue that all of our political chaos since the 1980's can be traced primarily back to that single decision.
>While her aggressive stance led to intense criticism from corners of the tech industry, she defended her approach by saying that only a tiny percentage of deals received “a second look”
The founding team at Figma would have gotten a similar amount much sooner if the acquisition was let thru OR if the underwriters didn't screw them over by underpricing at $33.
[0] - https://pitchbook.com/news/articles/figma-ipo-pop-spotlight-...
Basically, before an IPO, the underwriters take the company on a "roadshow" in which they pitch the IPO to potential buyers.
There's a hierarchy of these: the best are very large buyers that place large orders and trade seldom. Pensions, sovereign wealth funds, etc.
Those buyers then make offers ("I'll buy 50MM at $100"), which the bank uses to set the IPO price. The bank then gives them an allocation.
If you're a high (10MM+) net worth individual that banks with one of the underwriters, you can often get an allocation in an IPO. The richer you are, the more of an allocation you can get.
When an IPO pops, it's these people that get the benefit.
The benefit for the company is that the stock is owned by prime people the bank selected: you crucially _don't_ want to just sell to the highest bidder if they are going to dump the stock immediately after the pop (or that's the theory, at least). They have stable shareholders with a vision aligned with management.
The benefit to the bank is that they get to reward their customers with access to profitable trades--but the bank itself does not profit.
Ultimately the IPO price is driven by supply and demand with a limited supply: price will go down (a bit) when the lockout period ends and more supply comes online.
Raising capital can be done "democratically" if the founders want to. They can use direct listing. IPO is an option, not an obligation.
…you need money to be a small investor.
Yes, an ipo is volatile, it should be! You are literally pricing a company.
Sigh, regardless, Thisnis again one of these ways where free markets are being smashed by monopolistic behavior - you can only be a part of the game if you already have enough.
You can buy VTI which takes about 7% allocation in every IPO, but I heard there is research by some folks at Harvard and practiced by dimensional fund advisors‘ funds that buying IPOs ~two years later is slightly better?
Ignore the haters, keep being right about books.
What do you propose? A speculative free-for-all like with crypto meme coins?
You also sometimes need to tactically trade with worse brokers so they will feel nicer during an IPO.
Most companies without such expert advice could step into some pitfalls. Just a guess, I am not an expert, but if my company were doing an IPO I would prefer it not to play financial games to eke out a percent of IPO price and instead focus on long term price stability to become a solid stock. My 2c.
The company wants to avoid sharp drops after the IPO, as those encourage employees to get out ASAP, which increases the volatility and discourages large, stable investors.
We all knew the Switch 2 MSRP, but we had to wait for launch to see the eBay Buy it Now price.
In this case, the banks are Best Buy. They sold out quickly! Other market players are eBay sellers: the ones that knew what they were doing made a killing selling to consumers.
Even from capital point of view everyone is now forced to make their bet - either on adobe or figma, so it’s more efficient capital allocation too.
- sell the company to a bigger player, reinforcing their dominant position (often close to monopolistic in tech).
- go to IPO, keeping the company independence and fighting power concentration.
People keep coming up with theories that companies are about to corner the market then over-charge, but the theories vastly outnumber the cases where it ever happens in practice. It is almost always that the biggest companies in the market are just more competitive (lower prices or higher quality) than all the others.
A clone would need to start from scratch and compete against a huge corporation with virtually unlimited funds.
> It is almost always that the biggest companies in the market are just more competitive (lower prices or higher quality) than all the others.
That is almost always not what is happening. The big players extinguish any would-be competition early by buying them or throwing sticks into their wheels. They can afford to strategically make a loss in a given area to underbid the competition by overcharging in others, or relying on synergies. There are numerous examples where small teams built highly qualitative alternatives to corpo stuff, but had to compete against the network effects and brand names instead.
2. Yes, Figma luckily IPOed in an extremely hot market
Getting a bit lucky doesn't mean this was a success overall. The conclusion has many more years to go before it gets written. Either way, I don't like the over reach by Lina Khan.
A company exists primarily to make things for consumers and the FTC ensures they do that fairly. The IPO, stock price and everything else is secondary.
What do you mean over reach? It's the FTC's job to prevent consumer market consolidation.
Also, the EU and UK also made it clear they were against the merger. In fact, if you look at most reporting, the EU and UK seem to be the main reason they gave up, presumably because they know the US FTC has no teeth, even with a competent chair.
I don't have a popular opinion on HN. I don't think Google should be broken up because new technology has made Google search much less needed. I don't think Apple should relinquish control over its app store because it's Apple's platform and they should do what they want. I don't think Adobe should be stopped from buying Figma because even if Adobe buys it, maybe some rich ex-employees might quit and make another competitor or make an open source alternative. Who knows.
People on HN wants the government to weaken tech companies but not when it's the tech company they're working in.
I said sort-of because the economics of this is more complicated. Investors lose their preferences when they sell in an IPO, so this is probably better for common stock holders.
I don’t think 19.3 B is their current market cap, it’s only what was sold at the IPo. Anyway, 19.3 instead of 20 would have been no big deal IMO
Adobe certainly lost money, because they have had to compete against the better product, so have been able to charge less for their own offering. And will presumably continue to do so until further notice.
Any employees who would have been swiftly laid off after the acquisition should certainly be glad for this outcome. They still have jobs, and if there are layoffs after the IPO it will be less dramatic. If they had equity, they probably got a much better deal in an IPO, especially if they sold some of it off after the “pop”.
The market works best with competion. It's better for the workers, the customers, society and innovation in general.
A giant monopoly buying potential competitors is bad for everyone other than owners of that giant monopoly.
Caplan said it best. The market is great at doing good things that sound bad. The government is great at doing bad things that sound good.
Regulations are literally the only thing slowing down the corporate dystopian future.
Mergers trigger layoffs
I can understand you looking at the headline valuation but as an independent company traded with lots of potential to grow with AI tools their stock will probably double… a quick Google appears to suggest a 250% uplift from the IPO price so the company would potentially have added $58bn (the figure I’ve seen quoted) to Adobe’s bottom line.
Lina Khan was right at least on this merger!
But also as you said this is 3 years later, which is a long time in the tech business and all sorts of things have changed, positive and negative... so she's not clearly right either...
I know that because if the metric you cite was something that the investors and managers cared about, they could have done other things to boost it (see footnote 1). They didn't, ergo they don't consider that metric to be a useful gauge of the company value. It sure looks like you tried to find the worst performing metric to claim that there was a loss, when so far this has been a major win for the shareholders(2).
1: If you don't want this and want to IPO at the highest valuation, you do a direct listing like Spotify did, or a SPAC reverse merger like Trump Media did. But there are reasons that the vast majority of companies choose to do a traditional IPO. For most companies, this is a one-time transaction that will make the managers very very rich, and they want to get the best guidance on navigating it- and are willing to pay handsomely for that guidance, since this is the only time in their lives they will be CEO for a major company that is starting to list. So they follow the IPO/greenshoes/pop route.
2: The most important nuance on that statement is that it took them a year and a half to extract that extra value by doing an IPO, and now they are exposed to market risk. We will have to see what the market conditions are like in another few months when the lock-ups expire.
Also, Adobe was massively overpaying, arguably even if you consider that. Even if you assume it was due to seeing Figma as a huge competitive threat the stock nosedived due to the acquisition price.
Investors can feel free to hold onto their remaining shares and sell whenever they want, outside of a window following the IPO where they can’t.
Having companies stay private growing from 0 to 100B value allows VC bros to capture all the growth and then unload onto the public via IPO or selling to a larger BigTech firm.
I would disagree. Japan is a good example of a market where there are a lot of small public companies and they're largely held by the founders. There is not enough share holder pressure and these small public companies are often barely profitable and run poorly. I am sure there are other markets that are similar to Japan where there are publicly traded companies without enough buyers or liquidity or transparency, etc.
this implies they're unloading at a valuation that is higher than it is worth. If so, why do "the public" make the purchase?
It’s called FOMO.
Given that this sell side analyst defines success as growth, this seems rather like a tautology.
Post-2015 other than large language models this industry has mostly been riding on intellectual property consolidation. That's basically Lina's point; nobody actually benefits from this - not customers, not share holders, not the American people. The over practice of M&A leaves a small pool of winners who are not the kind of people that post on or read this forum.
The secondary market drives the primary market.
What incentive would Amazon have to drop prices after vertical integration is done?
Why would Amazon, having lowered their costs, pass that savings on to the consumer when they could simply profit more?
So this would basically encourage companies to either have their own IPO (no fee at all) or be acquired (merged really) by a company of equivalent size. If you are acquired by a much larger company, that company will have to pay a (logarithmicaly) large fee relative to the acquisition price. If they really want it, no problem, but it will be "cheaper" for a more correctly sized company to acquire them.
Like if this regulation was replaced in favor of this tax, a big company merging with another big company would be considered fine when obviously big company mergers can be just as concerning as larger companies buying smaller ones
>In the matter of reforming things, as distinct from deforming them, there is one plain and simple principle; a principle which will probably be called a paradox. There exists in such a case a certain institution or law; let us say, for the sake of simplicity, a fence or gate erected across a road. The more modern type of reformer goes gaily up to it and says, "I don't see the use of this; let us clear it away." To which the more intelligent type of reformer will do well to answer: "If you don't see the use of it, I certainly won't let you clear it away. Go away and think. Then, when you can come back and tell me that you do see the use of it, I may allow you to destroy it."
I haven’t given this much thought, but my gut feeling is that it should be OK for a big company to acquire a smaller one if both sides agree and it’s not blatant anti-trust material (as with Meta acquiring Instagram).
The reality is most startups are not like Figma. They would make pretty bad businesses and their only exit strategy is to get acquired.
There's simply no way they could stand on their own legs and go public.
That would be a great point if there were any indication at all that’s what Khan was implying. It’s either an intentionally disingenuous reading of her statements, or else an unintentionally dim comprehension of them…from an analyst…
It’s also not a great sign that Business Insider thought this was the best way to end this article. At the very least, how about interrogating whether or not their “innovative growth” might have something to do with how healthy regulatory systems might work to facilitate such things? Or whether that innovative growth could have continued apace under Adobe’s management?
I suppose I am being too credulous, and it’s more likely the same widely shared ideological bent that celebrates free market dynamism with each success, and decries oppressive regulations with each misstep. A culture that sees virtue in offshoring profits while simultaneously using them to eliminate competition, erode consumer protections, lobby for preferential tax credits, and generally skirt any/all obligations to the society which provided them with the opportunities, infrastructure, finance markets, skilled workforce, and well-qualified consumers that are all prerequisites to “innovative growth”.
I think the FTC was spot on with the Adobe-Figma merger, but there were quite a few other mergers they either prevented, tried to prevent, or were regretful about not preventing, where that was a very bad decision.
I think a dramatic redesign of the M&A system needs to occur.
For example, I think a merger/acquisition ban for companies of a medium to large size could be an effective design of our corporate system. Most medium to large sized companies make acquisitions and mergers out of convenience and a desire to thin out competition rather than any sort of business need.
A company like Apple or Google or perhaps even a much smaller one should be disallowed from acquiring companies or being a part of a merger from the standpoint that they are sufficiently large as an entity.
Examples like the Apple acquisition of DarkSky and Beats or Google’s purchase of Nest represent companies who clearly have sufficient resources to build a competitor and new entrant to the market internally, but out of the economics of the arguably lazy M&A shortcut they are allowed to buy competitors and remove choice from the market to the detriment of both customers and the labor market.
In short, we’ve just accepted the base assumption that companies are allowed to buy each other at all and that entire concept is worth questioning.
https://www.reuters.com/business/google-hires-windsurf-ceo-r...
Unlike Figma, companies rarely want the startup’s product and usually end up either abandoning it or making it a part of their own offerings by getting their new hires to write it from scratch.
Even when they do need the acquiring companies IP, they license the IP and then poach the employees.
Microsoft almost did that too with OpenAI during the Altman fiasco.
I've learned to accept this when it comes to things like TSLA or Bitcoin. But it's new to me that we do legislation like this.
The tradeoffs of allowing or preventing the merger are more abstract and counterfactual. We cannot know for sure what the world in which Adobe successfully acquired Figma would look like. Its natural to imagine concerns of Adobe simply killing, enshittifying or failing to improve the product - all things that still may happen under Figma's new corporate structure. Also consider the potential integrations with and improvements to Photoshop that have been missed.
That all being said I think Figma is an excellent product for the price and I have no fondness towards Adobe (though I've never really been a customer) and I'm glad that Figma exits as its own delightful product.
We can’t know for sure whether increased competition is going to lead to a better outcome here, but we can say with a high level of certainty that more competition usually leads to better outcomes.
The fact that this also turned out to be fantastic for investors is just icing on the cake. Increased competition in markets is a worthy goal in itself.
There most likely would have been fewer firms if the merger went through (though it could be possible that more competitors enter the market in that alternate timeline). Idk if that constitutes less competition necessarily, and competition understood as number of firms or something similar certainly doesn't always lead to better outcomes.
In the cases of "natural monopolies", consumer welfare is maximized when one firm is able to realize all the economies of scale because the benefits of mass production are so large that goods/services can only be produced at the lowest cost with sufficient consolidation. Utilities like electricity and water are often used as examples of natural monopolies.
You did say usually in fairness and I'd agree that increased competition usually leads to better outcomes. And we usually see multiple firms competing in any given industry without antitrust intervention.
I’m all for the government getting out of the way of business, but we’ve seen a large amount of consolidation in many software categories.
Adobe’s market share is pretty extreme already in the creative software space, and I think it is reasonable for the government to step in to try to prevent further consolidation.
I agree with you that it’s really unknowable whether blocking or not blocking was a better choice. But if we only made decisions based on knowing the outcome, we’d never do anything.
- the companies that died because acquiring them was too much of a hassle
- the companies that died or never got funded / started because the investors couldn't see and exit path
- the companies that got acquired piecemeal (Windsurf, Inflection), leaving the early employees with NOTHING simply to avoid the ire of anti-trust hawks at the FTC. This has irreversibly damaged the SV bargain - early startup employees work hard in case of an acquisition, they get rich.
So Lina Khan can keep patting her own back but there's a reason founders, early-stage startup employees and investors disagree.
So it was a shitty non-viable business
> the companies that died or never got funded / started because the investors couldn't see and exit path
More shitty non-viable business. Creating a company only to sell it and screw over your customers is evil.
Maybe those founders should try to make real businesses, instead of playing glorified rollette.
> the companies that got acquired piecemeal (Windsurf, Inflection), leaving the early employees with NOTHING simply to avoid the ire of anti-trust hawks at the FTC
Plain-old loop hole exploitation. Simple anit-competetive stealth aquihire that isn't called so. My conclusion is that the market needs more regulations.
Does your ideal market only contain 5 or mega-corps that control every aspect of our lives?
1. is there any role for gov't antitrust in your view of modern capitalism? 2. if there is a role, why is Adobe x Figma not the perfect example for enforcement? 3. if your answer is "Adobe clearly isn't a monopoly, look at the existence of Figma as evidence," why are you dumb?
Principles don’t pay the mortgage.
Personally, I think it’s unacceptable to have any business worth 4T as a single company. It’s not good for competition and for customers in the long term. But today’s anti competitive tactics are different from the simpler monopolistic tactics of the past. We need all new regulations to deal with it.
Adobe buying Figma at that time looked likely to reduce competition in the "creative" software market.
> your startup
You're under the misconception that companies "belong" to individuals. Companies are legal frameworks that society has decided upon. We could legally decide that M&A just isn't allowed, ever, if we wanted to. (I don't think that would be a good idea, but I hope you see my point.)
If it's a one person shop, then sure it's "yours", and the FTC can't block you from being hired (that I'm aware).
So “society” should be able to veto a sale, but when payroll is due the owners are on the hook?
How many times did the FTC fail in court under her watch? More than I can count on two hands.
Meanwhile local and state utility and cable tv monopolies continue to _flourish_ without so much as a peep.
The purpose of the FTC is literally to take regulatory action to prevent unfair competition. Your argument is that you shouldn't appoint a commissioner on the basis that they think large tech companies are engaging in anti-competitive behaviour?? Note that this position isn't playing dictator; the FTC is subject to judicial oversight.
> Meanwhile local and state utility and cable tv monopolies continue to _flourish_ without so much as a peep.
How do we know this isn't just your preexisting prejudice of cable companies? Maybe you've just got an obsession with "big [cable] is bad"? On a serious note – it seems that you _do_ agree with antitrust regulation, just not against Facebook/Amazon for some reason (and only against Comcast)??
Big is bad bro. There’s like 5 companies carrying the entire S&P rn how is that good for anyone outside of those 5 companies?
Asserting a sloganized refrain is not very convincing. Make a real argument. Here are some counterpoints to "big is bad" Neobrandeisianism: -Scale enables better economics for certain businesses which consumers and other businesses then benefit from. -Large size allows additional speculative cutting edge R&D funding which the whole world benefits from even if it never pays off. -Being big on its own is almost never a cheat code to permanent monopoly / monopsony lock-in, especially in the technology business. That comes from actual anti-competitive behavior or regulatory capture (which ARE the parts that should be regulated, rather than targeting or preventing size for its own sake).
The S&P point is more than a bit overstated and it also doesn't really matter? The subset of the S&P that's performing well will naturally get weighted higher over time, until the performance changes. It doesn't really matter if the S&P is driven by 5 enormous companies or 500 equally-sized ones. Whatever works at the moment is what gets rewarded with capital -- that's the point of the system and it's been more effective than any alternatives. Besides, it'd be poor investing practice to be literally all-in on the S&P.
Meta is top 10 for DC lobbying. No regulatory capture to see here.
And why is it that no one is talking about the biggest vertical and horizontal roll ups in all of corporate America in healthcare? Interesting.
Using "big" as a synonym for "consumers are worse off than alternatives" does not do anyone justice.
> At least she was trying to enforce antitrust for once.
Her prejudice against big tech and pretty much ignoring any other industries is not something to be proud of.
-Over $1.5B refunded. Significant settlements (Epic, MoneyGram, Amazon delivery drivers, etc.)
- Junk-fees ban, click-to-cancel rule (You can thank the current administration for walking back on this), non-compete ban.
-Right to repair, data privacy enforcement, health-care pricing interventions ( reduced out-of-pocket costs for inhalers and insulin).
FTC under her blocked Kroger/Albertsons, blocked Tapestry/Capri, ended non-competes, enacted click to cancel, made major strides on right to repair, etc. in addition to all the “prejudice against big tech” which are the titans of industry right now…
The essay (literally, a homework assignment she did at law school) for which she became famous that criticizes Amazon for being big is so chock full of errors, misconstructions and faulty logic, that it's an indictment of some really poor political habits and instincts that the US is prone to. That due diligence in vetting her as a rigorous and informed thinker on the topic failed is an unequivocal failure.
source?